METALS-Copper hits 1-week high on China restocking

Thu Apr 25, 2013 12:15pm EDT

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* Zinc needs more losses to cut surplus- analyst
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    By Eric Onstad
    LONDON, April 25 (Reuters) - Copper rose to a one-week high on Thursday, the
second day of gains, on signs of industry restocking in top consumer China and
hopes for more central bank easing after weak economic data in Europe.
    Short-covering also spurred three-month copper on the London Metal Exchange
(LME) to hit a session peak of $7,197 a tonne, its highest since April
17. It closed at $7,180 on Thursday from $7,029.50 at the close on Wednesday.
    On Wednesday copper rebounded 2.3 percent after hitting an 18-month low of
$6,762.25 a tonne on Tuesday. It has shed about 10 percent so far this year.    
    "All the signs suggest to me that there is some very, very good buying
coming out of China, and it's probably the end-users taking advantage of very
low copper prices to rebuild their inventories that have been at extremely low
levels," said Nic Brown, head of commodities research at Natixis in London.
    "There are reports of falls in (Chinese) bonded warehouse stocks, very high
trading volumes, a significant increase in open interest (in Shanghai), and a
rise in physical premiums."
    The most-traded August copper contract on the Shanghai Futures Exchange
 rose 2.7 percent to close at 51,280 yuan ($8,300) a tonne.    
    Open interest in the most active ShFE copper contract had reached a record
high near 420,000 lots on Tuesday, when prices hit the lowest in almost three
years. 
    But as prices bounced on Wednesday, open interest fell 14 percent,
reflecting a shutdown of short positions, which traders said continued on
Thursday.
    Book-squaring in China, ahead of next week when markets will be closed for
three days due to Labour Day holidays, fuelled short-covering in Shanghai.
 
    "Below $7,100 we are still going to stay in the lower range, although trade
will be choppy. Above that level I think people might start to see how deep
their pockets are," a Hong Kong-based trader said.
    Copper prices may not make significant gains until the import arbitrage
window opens again between China and the LME after bonded warehouse stocks have
eroded more, Brown added.
    Recent weak economic data have had a two-pronged impact on LME metals -
capping gains due to uncertainty about demand from a sluggish global economy,
but also providing some support recently after signals that the European Central
Bank could cut rates as soon as next week. 
    Also, data indicating resilience in the U.S. labour market has allayed
concerns about the pace of the economic recovery. 
        
    DOWNSIDE SEEN FOR ZINC
    LME zinc reversed earlier losses to close at $1,936 from $1,919 a
tonne at the close on Wednesday.
    Analyst Colin Hamilton at Macquarie in London said weak zinc prices last
year spurred shutdowns in Chinese smelter capacity but failed to have an impact
on mine supply, resulting in a further surplus in concentrates.
    "As such, we feel that zinc prices still potentially have decent downside
from current levels, in order to cause pressure on concentrate supply," he added
in a note.
    Zinc touched a low of $1,816.50 a tonne on April 18, the weakest since last
October, when prices fell to $1,812.50. Last year's lowest level of $1,745 was
hit in June.
    Nickel also reversed earlier losses to close at $15,440 from $15,270
on Wednesday. During that session it slid as low at $15,075, the lowest since
July 2009. LME stocks were at record peaks above 175,000 tonnes. 
    Tin closed at $21,110 from $20,900, aluminium at $1,942 a
tonne from $1,911, and lead at  $2,076.50 from $2,045.
    
 Metal Prices at 1600 GMT
 Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
  Metal            Last      Change  Pct Move   End 2012   Ytd Pct
                                                              move
  COMEX Cu       324.80        9.10     +2.88     365.25    -11.07
  LME Alum      1940.00       29.00     +1.52    2073.00     -6.42
  LME Cu        7177.25      147.75     +2.10    7931.00     -9.50
  LME Lead      2074.50       29.50     +1.44    2330.00    -10.97
  LME Nickel   15405.00      135.00     +0.88   17060.00     -9.70
  LME Tin      21101.00      201.00     +0.96   23400.00     -9.82
  LME Zinc      1933.50       14.50     +0.76    2080.00     -7.04
  SHFE Alu     14645.00       50.00     +0.34   15435.00     -5.12
  SHFE Cu*     51500.00     1250.00     +2.49   57690.00    -10.73
  SHFE Zin     14690.00      135.00     +0.93   15625.00     -5.98
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07
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